Question

The project administrator is preparing a preliminary budget for a project and adds in the cost of a new computer of the project team to use. What type of cost would this computer purchase represent?

a. Variable
b. Direct
c. Indirect
d. Variable Direct

Answer 1

A new computer purchased for a project team constitutes a fixed and direct cost, as it is an expense that directly relates to the project and does not vary with the level of production after its acquisition.

Step-by-step explanation:

The purchase of a new computer for the project team would represent a fixed cost and more precisely, a direct cost to the project. Fixed costs are those expenditures that do not change in relation to the level of production. They are incurred regardless of the amount of goods or services a company produces. Examples include rent for a factory or lease for equipment, which are costs that remain constant even if production levels change. In the context of a project, a computer would be considered a direct cost because it is an expense directly attributable to the project work and it's necessary for the team to perform their tasks. Once you acquire a computer, the cost is fixed, as it does not vary with project activities after purchase.